Merchant-bank

A lucid, searing and compelling analysis of America's poverty industry, "Merchants of Misery" starts off by illustrating how discriminatory banking practices disallow poor and minority coneumers to partake of their services. By refusing banking services (loans) in disadvantaged neighbourhoods, mainstream banks are creating a vacuum that is being filled by cheque-cashers, high-rate mortgage companies and other financial enterprises eager to fleece the poor.

"Merchants of Misery" provides glimpse after glimpse into the lives of real poverty-stricken people and their efforts to fight back. Fighting back by way of consumer rights attorneys, neighbourhood activists and a coalition of average citizens attacking the purveyors of this despicable industry with lawsuits, protests and alternative financial services. A powerful book.

Wake has taken the opportunity to provide an unparalleled insight into the development of Kleinwort & Sons and Robert Benson & Co., tracing the former from its roots as a gun-running operation in Cuba, and the latter from a Quaker family in Lancashire.

Unlike many similar books, however, Wake goes beyond looking at the firms involved as her subtitle 'Two families in banking' implies. Consequently her work is packed with the stories, family anecdotes and gossip that really bring such a book to life.

An excellent and very enjoyable read which I would highly recommend to anyone remotely interested in the subject.

The Lombards ran pawn shops, the equivalent of today's plastic credit card. Consumer debt, at fairly high interest rates, with the pawned objects as security, starts here. Very poor people who needed to borrow small sums from time to time depended on the Lombards--and hated them too. Notice that widows and others could invest in the pawn shop--loan money to the Lombards--and receive interest once a year. This was working capital for the pawn shop owner; otherwise he would have a warehouse full of objects and no money to lend to his customers.

Goods flowed and credit flowed and business boomed. There were defaults; too many defaults would drive the bankers, money-changers and Lombards into bankruptcy which in turn ruined merchants and manufacturers. Finally Bruges lost out to Antwerp.

I thoroughly enjoyed this book. The author gives interpretations as well as facts. One can get a clear picture of Bruges in its heyday.

No stone is left on turn in this thorough analysis of this legendary banking family. One of the major non-jewish banking houses of its era the author, Mr.Ziegler, shows how instrumental this bank was in the forming of the United States and its continued growth.

Mr.Ziegler also shows the intricate strategies that the Barings family uses to keep the bank in the family.

If you have ever been intrigued by the darker side of banking, this book is for you. You will not be disappointed at this glimpse of history.

Steve Coates, Hong Kong.

Leeson was a bad trader, good liar and compulsive gambler. A bad mix. Add to that profit hungry executives who fed Leeson's addiction with Baring's entire capital stock, and you end up with a busted bank. When he's finally caught, a prison mate tells Nick, "It was a mercy killing. If you hadn't done it someone else would've." Capitalism, for good or ill, is wonderfully efficient at transferring wealth from weak hands to the strong. The surprise is not that the 232-year old Barings went bust overnight, but rather, that it lasted so long in such incompetent hands. There are those among the British elite who flourish only because the Establishment takes care of its own, even the idiot cousins. Barings had more than its share of these.

The real tragedy of this story is not the wrecking of Barings, but the wrecking of Lisa Leeson who, by all accounts, was an angel. Everyone else got what they deserved, but she was truly the innocent bystander caught in the crossfire.

At first glance, the book is organized fairly well. Starting with the fall of the bank in early 1995, the first three chapters of the book give some interesting background on the Barings family and merchant bank. We also learn that at one point, the Barings family was considered to be one of the six great powers of Europe. In part two of the book, readers who are unfamiliar with exotic financial instruments received a thorough and comprehensive introduction to options, futures, and other exotic derivatives. Throughout the explanations Zhang employs vivid analogies and clever examples to get his point across. In part three of the book, Zhang makes a weak though well substantiated attempt to implicate the Japanese economy as the real culprit and devotes nearly a whole chapter to explaining the state of the Japanese economy at the time of the bankruptcy. Zhang gives us a brief history lesson of the Japanese political economy and Japanese financial markets, and a snapshot of Japanese economic and financial activity in and around the first two months of 1995.

Zhang agrees with such financial scholars as Jorion, author of Big Bets Gone Bad, that the people who wield these exotic derivative products are often more dangerous than the products themselves. Here, just as in the case of Robert L. Citron's key role in the Orange county bankruptcy and the rocket scientists at the helm of Long Term Capital Management's financial collapse, this line of reasoning may very well be true.

It is true that this author focuses as much on the role of management in the fall of Barings as on Nick Leeson's role in it, which is fine. It is an opinion that she substantiates somewhat persuasively throughout the book. The reader gets the sense that Nick was just an opportunist who took advantage of a glaring management weakness at Barings. (The author will not be able to persuade you, however, that Nick is just a good guy who slipped. He's scum. I think the author was too lenient with him.) But through her account of Baring Bank's mismanagement of its Futures division, the author provides a very useful lesson for senior management out there.